Housing Bubble
Builders offer Congress ideas to enhance tax plan
March 18 , 2003
WASHINGTON, /PRNewswire/ -- Expressing its support for President Bush's economic growth package, the National Association of Home Builders (NAHB) today told federal lawmakers it wants to work with the administration and Congress to enhance the plan so that all segments of the housing sector can continue to lead the economy forward.
"The President's tax plan will provide the economy with a much-needed shot in the arm by creating new jobs and stimulating economic growth, including more housing consumption and production," Bobby Rayburn, first vice president of NAHB and a home builder from Jackson, Miss., told the House Oversight and Investigations Subcommittee of the Financial Services Committee. "I am here today to explore approaches that will ensure that low-income housing programs maintain their current effectiveness."
Noting that the complex tax package has far-reaching implications for many sectors of the economy, including housing, Rayburn cited two recent studies by Ernst & Young and the Mortgage Bankers Association of America that analyzed the effect of the administration's proposal to eliminate the double taxation of corporate dividends on the Low Income Housing Tax Credit (LIHTC) program. The reports yielded far different results, with the E&Y study indicating this would have a negative effect on the LIHTC while the MBA study concluded that the dividend proposal could actually benefit the production of LIHTC units and have virtually no negative effect.
"It is important that we understand the full effect of this proposal as we move forward," said Rayburn, who noted that the LIHTC is America's leading affordable housing production program, producing more than 115,000 rental housing units annually for low-income households.
Rayburn outlined several possible approaches that can be used to avoid any potential harm to the LIHTC stemming from enactment of the administration's dividend proposal. One method would be to treat corporate earnings attributable to the LIHTC as taxed earnings that are not further taxed at the shareholder level. This solution would protect the LIHTC from any adverse consequences stemming from the President's dividend proposal. "In fact, in 1992 the Treasury Department made a similar proposal that would exempt all dividends received by a shareholder from ordinary income taxes," he said.
Other ideas advanced by Rayburn include removing or increasing the current limit on the amount of LIHTCs that individual investors can use; removing the LIHTC from items used to calculate the Alternative Minimum Tax; increasing the state volume cap on LIHTCs from the current $1.75 per capita; and removing LIHTC limits on individual projects that currently stand at either 4 percent or 9 percent of total development costs, depending on the type of transaction.
"We believe the President's economic proposal is good for the economy and good for housing. Enacting any of these approaches outlined at today's congressional hearing would offset any unintended consequences to low-income housing programs and the families who depend upon them," said NAHB Executive Vice President and CEO Jerry Howard.
Source: National Association of Home Builders
